Dissecting The Fourth Element of the Six Intangibles that Build FBO Equity

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Part One: Building a Sound Balance Sheet with Consistent EBITDA Performance

By John L. Enticknap and Ron R. Jackson, Principals, Aviation Business Strategies Group

In our continuing series expounding on the six intangibles that can build equity in your FBO, we break down the fourth intangible: Building a Sound Balance Sheet with Consistent EBITDA (Earnings Before, Interest, Taxes, Depreciation and Amortization) Performance.

The value of putting together a sound balance sheet consistently over several years has a lot of weight with the banking community, which is your primary ally when it's time to finance capital improvements to your facility. A strong balance sheet can also be viewed favorably by the airport authority when it's time to renew a lease or extend a lease for multiple years.

Adding in the dimension of demonstrating a consistent EBITDA performance is a plus when an FBO ownership is looking to sell the enterprise. Often, investors and buyers look to EBITDA performance in order to determine the value of an FBO, or for that matter any business. The resulting evaluation, and thus the offer, is usually based on a multiple of the EBITDA number.

The benefits of producing a sound balance sheet include:

  • Provides a business snapshot of your FBO at a specific time.
  • Easily calculates financial ratios to determine the company's fiscal outlook and profitability.
  • Determines credit worthiness for investors and banks in order to obtain loans and funding.
  • Show financial transparency into the company's assests and liabilities.
  • Discloses the solvency of the FBO business to minimize investment risks.

In future blogs, we'll share some tips on how you can use your balance sheet to understand your current ratio, cash–to-debt ratio and debt-to-equity ratio. These numbers allow you to fully understand your FBO's financial position and how to measure liquidity. In addition we will discuss how to achieve consistent EBITDA performance.

There are many factors and nuances to developing a sound balance sheet that we will not be able to cover in this blog. Therefore, we encourage you to attend one of our FBO Success Seminars where we spend additional time discussing this important topic as well as others.

Please Share your comments in the space below.

ABOUT THE BLOGGERS:

John Enticknap has more than 35 years of aviation fueling and FBO services industry experience. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.

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